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Oppenheimer Money Market Fund, Inc.
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Prospectus dated November 27, 1998
Oppenheimer Money Market Fund, Inc. is a money market mutual fund. Its
goal is to seek the maximum current income that is consistent with stability
of principal. The Fund invests in short-term, high quality "money market"
securities.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
(logo)OppenheimerFunds
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
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Contents
About The Fund
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The Fund's Objective and Investment Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
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How to Buy Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends and Tax Information
Financial Highlights
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About the Fund
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The Fund's Objective and Investment Strategies
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What Is the Fund's Investment Objective? The Fund's objective is to seek the
maximum current income that is consistent with stability of principal.
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What Does the Fund Invest In? The Fund is a money market fund. It invests in a
variety of high-quality money market securities to seek income. Money market
securities are short-term debt instruments issued by the U.S. government,
domestic and foreign corporations and financial institutions and other entities.
They include, for example, bank obligations, repurchase agreements, commercial
paper, other corporate debt obligations and government debt obligations maturing
in 397 days or less.
Who Is the Fund Designed For? The Fund may be appropriate for investors who want
to earn income at current money market rates while preserving the value of their
investment, because the Fund is managed to keep its share price stable at $1.00.
Income on short-term securities tends to be lower than income on longer term
debt securities, so the Fund's yield will likely be lower than the yield on
longer-term fixed income funds. The Fund also offers easy access to your money
through checkwriting and wire redemption privileges. The Fund does not invest
for the purpose of seeking capital appreciation or gains.
Main Risks of Investing in the Fund
All investments carry risks to some degree. Funds that invest in debt
obligations for income may be subject to credit risks and interest rate risks.
However, the Fund is a money market fund that seeks income by investing in
short-term debt securities that must meet strict standards set by its Board of
Directors following special rules for money market funds under federal law.
These include requirements for maintaining high credit quality in the Fund's
portfolio, a short average portfolio maturity to reduce the effects of changes
in interest rates on the value of the Fund's securities and diversifying the
Fund's investments among issuers to reduce the effects of a default by any one
issuer on the value of the Fund's shares.
Even so, there are risks that any of the Fund's holdings could have its
credit rating downgraded, or the issuer could default, or that interest rates
could rise sharply, causing the value of the Fund's securities (and its share
price) to fall. As a result, there is a risk that the Fund's shares could fall
below $1.00 per share.
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An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
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The Fund's investment manager, OppenheimerFunds, Inc., tries to reduce
risks by diversifying investments and by carefully researching securities before
they are purchased. However, an investment in the Fund is not a complete
investment program. The rate of the Fund's income will vary from day to day,
generally reflecting changes in overall short-term interest rates. There is no
assurance that the Fund will achieve its investment objective.
The Fund's Past Performance
The bar chart and table below show how the Fund's returns may vary over time, by
showing changes in the Fund's performance from year to year for the last ten
calendar years and its average annual total returns for the 1-, 5- and 10- year
periods. Variability of returns is one measure of the risks of investing in a
money market fund. The Fund's past investment performance is not necessarily an
indication of how the Fund will perform in the future.
Annual Total Returns (% as of 12/31 each year)
[See appendix to prospectus for annual total return data for bar chart.]
For the period from 1/1/98 through 9/30/98, the cumulative total return (not
annualized) was 3.70%. During the period shown in the bar chart, the highest
return (not annualized) for a calendar quarter was 1.98% (4Q'88) and the lowest
return for a calendar quarter was 0.63% (1Q'93).
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Average Annual Total
Returns for the periods Past 1 Year Past 5 Years Past 10 Years
ending December 31,
1997
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Oppenheimer Money 4.94% 4.32% 5.48%
Market Fund, Inc.
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The returns in the table measure the performance of a hypothetical account and
assume that all distributions have been reinvested in additional shares. The
total returns are not the Fund's current yield. The Fund's yield more closely
reflects the Fund's current earnings.
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To obtain the Fund's current 7-day yield information, please call the Transfer
Agent toll-free at 1-800-525-7048.
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Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration and other services. Those expenses are subtracted from the Fund's
assets to calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other expenses
directly, such as account transaction charges. The following tables are provided
to help you understand the fees and expenses you may pay if you buy and hold
shares of the Fund. The numbers below are based upon the Fund's expenses during
the fiscal year ended July 31, 1998. Shareholder Fees. The Fund does not charge
any initial sales charge to buy shares or to reinvest dividends. There are no
exchange fees or redemption fees and no contingent deferred sales charges
(unless you buy Fund shares by exchanging Class A shares of other Oppenheimer
funds that were purchased subject to a contingent deferred sales charge, as
described in "How to Sell Shares").
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
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Management Fees 0.43%
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Distribution (12b-1) Fees None
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Other Expenses 0.44%
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Total Annual Operating Expenses 0.87%
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"Other expenses" in the table include transfer agent fees, custodial fees, and
accounting and legal expenses the Fund pays.
Example. This example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in shares of the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's expenses remain the same. Your actual costs may be higher or
lower, because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
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1 Year 3 Years 5 Years 10 Years
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$ 89 $ 278 $ 482 $1,073
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About the Fund's Investments
The Fund's Principal Investment Policies. In seeking its objective of high
current income consistent with stability of principal, the Fund invests in
short-term money market securities meeting quality standards established for
money market funds under the Investment Company Act. The Statement of Additional
Information contains more detailed information about the Fund's investment
policies and risks.
n What Types of Money Market Securities Does the Fund Invest In? The
following is a brief description of the types of money market securities the
Fund may invest in. Money market securities are high-quality, short-term debt
instruments that may be issued by the U.S. Government, corporations, banks or
other entities. They may have fixed, variable or floating interest rates. All of
the Fund's investments must meet the special quality requirements set under the
Investment Company Act and described briefly below.
o U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
Some are direct obligations of the U.S. Treasury, such as Treasury bills, notes
and bonds, and are supported by the full faith and credit of the United States.
Other U.S. government securities, such as pass-through certificates issued by
the Government National Mortgage Association (Ginnie Mae), are also supported by
the full faith and credit of the U.S. government. Some government securities are
supported by the right of the issuer to borrow from the U.S. Treasury, such as
securities of Federal National Mortgage Corporation (Fannie Mae). Others may be
supported only by the credit of the instrumentality, such as obligations of the
Federal Home Loan Mortgage Corporation (Freddie Mac).
o Bank Obligations. The Fund may buy time deposits, certificates of
deposit and bankers' acceptances. They must be :
o obligations of a domestic bank having total assets of at least
$1 billion or
o U.S. dollar-denominated obligations of a foreign bank with
total assets of at least U.S. $1 billion.
o Commercial Paper. Commercial paper is a short-term, unsecured promissory
note of a domestic or foreign company. The Fund may buy commercial paper only if
it meets the Fund's quality standards, described below.
o Corporate Obligations. The Fund may invest in other short-term corporate
debt obligations, besides commercial paper, that at the time of purchase by the
Fund meet the Fund's quality standards, described below.
o Other Money Market Obligations. The Fund may invest in money market
obligations other than those listed above if they are subject to repurchase
agreements or guaranteed as to their principal and interest by a corporation
whose commercial paper may be purchased by the Fund or by a domestic bank. The
bank must meet credit criteria set by the Fund's Board of Directors.
Additionally, the Fund may buy other money market instruments that its
Board of Directors approves from time to time. They must be U.S.
dollar-denominated short-term investments that the Board must determine to have
minimal credit risks. They also must be of "high quality" as determined by a
national rating organization. The Fund may buy an unrated security that
otherwise meets those qualifications.
Currently, the Board has approved the purchase of dollar-denominated
obligations of foreign banks payable in the U.S. or in London, England, floating
or variable rate demand notes, asset-backed securities, and bank loan
participation agreements. Their purchase may be subject to restrictions adopted
by the Board from time to time.
o What Credit Quality and Maturity Standards Apply to the Fund's
Investments? Debt instruments, including money market instruments, are subject
to credit risk, the risk that the issuer might not make timely payments of
interest on the security or repay principal when it is due. The Fund may buy
only those securities that meet standards set in the Investment Company Act for
money market funds. The Fund's Board has adopted procedures to evaluate
securities for the Fund's portfolio and the Manager has the responsibility to
implement those procedures when selecting investments for the Fund.
In general, those procedures require that securities be rated in one of
the two highest short-term rating categories of two national rating
organizations. At least 95% of the Fund's assets must be invested in securities
of issuers with the highest credit rating. No more than 5% of the Fund's assets
can be invested in securities with the second highest credit rating. In some
cases, the Fund can buy securities rated by one rating organization or unrated
securities that the Manager judges to be comparable in quality to the two
highest rating categories.
The procedures also limit the amount of the Fund's assets that can be
invested in the securities of any one issuer (other than the U.S. government,
its agencies and instrumentalities), to spread the Fund's investment risks. A
security's maturity must not exceed 397 days. Finally, the Fund must maintain an
average portfolio maturity of not more than 90 days, to reduce interest rate
risks.
o Can the Fund's Investment Objective and Policies Change? The Fund's
Board of Directors may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies are those that cannot be changed without the
approval of a majority of the Fund's outstanding voting shares. The Fund's
investment objective is a fundamental policy. The Fund's investment policies and
techniques are not fundamental unless this Prospectus or the Statement of
Additional Information says that a particular policy is fundamental.
Other Investment Strategies. To seek its objective, the Fund may also use the
investment techniques and strategies described below. These techniques involve
certain risks. The Statement of Additional Information contains more information
about some of these practices, including limitations on their use that are
designed to reduce some of the risks.
o Floating Rate/Variable Rate Notes. The Fund can purchase notes with
floating or variable interest rates. Variable rates are adjustable at stated
periodic intervals. Floating rates are adjusted automatically according to a
specified market index for such investments, such as the prime rate of a bank.
If the maturity of a note is greater than 397 days, it may be purchased if it
has a demand feature. That feature must permit the Fund to recover the principal
amount of the note on not more than thirty days' notice at any time, or at
specified times not exceeding 397 days from purchase.
o Obligations of Foreign Banks and Foreign Branches of U.S. Banks. The
Fund can invest in U.S. dollar-denominated securities of foreign banks that are
payable in the U.S. or in London, England. It can also buy dollar-denominated
securities of foreign branches of U.S. banks. These securities have investment
risks different from obligations of domestic branches of U.S. banks. Risks that
may affect the bank's ability to pay its debt include:
o political and economic developments in the country in which the bank or
branch is located,
|_| imposition of withholding taxes on interest income payable on the
securities,
o seizure or nationalization of foreign deposits, o the establishment of
exchange control regulations and o the adoption of other governmental
restrictions that might affect
the payment of principal and interest on those securities.
Additionally, not all of the U.S. and state banking laws and regulations
that apply to domestic banks and that are designed to protect depositors and
investors apply to foreign branches of domestic banks. None of those U.S. and
state regulations apply to foreign banks.
o Bank Loan Participation Agreements. The Fund may invest in bank loan
participation agreements. They provide the Fund an undivided interest in a loan
made by the issuing bank in the proportion the Fund's interest bears to the
total principal amount of the loan. In evaluating the risk of these investments,
the Fund looks to the creditworthiness of the borrower that is obligated to make
principal and interest payments on the loan.
o Asset-Backed Securities. The Fund may invest in asset-backed securities.
These are fractional interests in pools of consumer loans and other trade
receivables. They are backed by a pool of assets, such as credit card or auto
loan receivables, which are the obligations of a number of different parties.
The income from the underlying pool is passed through to holders, such as the
Fund.
These securities are frequently supported by a credit enhancement, such as
a letter of credit, a guarantee or a preference right. However, the credit
enhancement generally applies only to a fraction of the security's value. If the
issuer of the security has no security interest in the related collateral, there
is the risk that the Fund could lose money if the issuer defaults.
o Repurchase Agreements. The Fund may enter into repurchase agreements. In
a repurchase transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the resale price on the
delivery date, the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so. There is no
limit on the amount of the Fund's net assets that may be subject to repurchase
agreements of 7 days or less.
o Illiquid and Restricted Securities. Investments may be illiquid because
of the absence of an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. Restricted securities may have
a contractual limit on resale or may require registration under federal
securities laws before they can be sold publicly. The Fund will not invest more
than 10% of its net assets in illiquid or restricted securities. That limit does
not apply to certain restricted securities that are eligible for resale to
qualified institutional purchasers. The Manager monitors holdings of illiquid
securities on an ongoing basis to determine whether to sell any holdings to
maintain adequate liquidity. Difficulty in selling a security may result in a
loss to the Fund or additional costs.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on handling securities
trades, pricing and accounting services. Data processing errors by government
issuers of securities could result in economic uncertainties, and those issuers
may incur substantial costs in attempting to prevent or fix such errors, all of
which could have a negative effect on the Fund's investments and returns.
The Manager, the Distributor and the Transfer Agent have been working on
necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's Custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Fund is Managed
The Manager. The Fund's investment adviser is the Manager, OppenheimerFunds,
Inc., which is responsible for selecting the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Board of Directors, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets forth the fees
paid by the Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment advisor since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $85 billion as of September 30,
1998, and with more than 4 million shareholder accounts. The Manager is located
at Two World Trade Center, 34th Floor, New York, New York 10048-0203.
o Portfolio Managers. Carol E. Wolf and Arthur J. Zimmer are the portfolio
managers of the Fund. They are the persons principally responsible for the
day-to-day management of the Fund's portfolio. Ms. Wolf has had this
responsibility since November 1988, and Mr. Zimmer since July 15, 1998. Ms. Wolf
is a Vice President and Mr. Zimmer a Senior Vice President of the Manager, and
each is an officer and portfolio manager of other Oppenheimer funds.
o Advisory Fees. Under the Investment Advisory Agreement, the Fund pays
the Manager an advisory fee at an annual rate that declines on additional assets
as the Fund grows: 0.45% of the first $500 million of average annual net assets,
0.425% of the next $500 million, 0.40% of the next $500 million, and 0.375% of
net assets in excess of $1.5 billion. The Fund's management fee for the fiscal
year ended July 31, 1998 was 0.43% of the Fund's average annual net assets.
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About Your Account
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How to Buy Shares
How Are Shares Purchased? You can buy shares several ways -- through any dealer,
broker or financial institution that has a sales agreement with the Fund's
Distributor, directly through the Distributor, or automatically through an Asset
Builder Plan under the OppenheimerFunds AccountLink service. The Distributor may
appoint certain servicing agents to accept purchase (and redemption) orders. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
The Fund intends to be as fully invested as possible to maximize its
yield. Therefore, newly-purchased shares normally will begin to accrue dividends
after the Distributor accepts your purchase order, starting on the business day
after the Fund receives Federal Funds from your purchase payment.
o Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
o Guaranteed Payment Procedures. Some broker-dealers may have arrangements
with the Distributor to enable them to place purchase orders for shares on a
regular business day and to guarantee that the Fund's custodian bank will
receive Federal Funds to pay for the shares by 2:00 P.M. on the next regular
business day. The shares will start to accrue dividends starting on the day the
Federal Funds are received by 2:00 P.M.
n Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. Your check
should be in U.S. dollars and drawn on a U.S. bank so that dividends will begin
to accrue on the next regular business day after the Distributor accepts your
purchase order.
If you don't list a dealer on the application, the Distributor will act as
your agent in buying the shares. However, we recommend that you discuss your
investment with a financial advisor before your make a purchase to be sure that
the Fund is appropriate for you.
o Buying Shares by Federal Funds Wire. Shares purchased through the
Distributor may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department at
1-800-525-7048 to notify the Distributor of the wire, and to receive further
instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the Automated Clearing House (ACH)
transfer to buy the shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to "AccountLink,"
below for more details. Dividends begin to accrue on shares purchased this way
on the business day after the Fund receives the ACH payment from your bank.
o Buying Shares Through Asset Builder Plans. You may purchase shares of
the Fund (and up to four other Oppenheimer funds) automatically each month from
your account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are in the Asset Builder Application and the
Statement of Additional Information.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and additional investments for as
little as $25. Additional purchases of at least $25 can be made by telephone
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans
and 401(k) plans, you can start your account with as little as $250. If your IRA
is started under an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be as little as $25.
o The minimum investment requirement does not apply to reinvesting
dividends from the Fund or other Oppenheimer funds (a list of them appears in
the Statement of Additional Information, or you can ask your dealer or call the
Transfer Agent), or reinvesting distributions from unit investment trusts that
have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price, which is
the net asset value per share without any sales charge. The net asset value per
share will normally remain fixed at $1.00 per share. However, there is no
guarantee that the Fund will maintain a stable net asset value of $1.00 per
share.
The offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the Distributor
receives the purchase order at its offices in Denver, Colorado, or after any
agent appointed by the Distributor receives the order and sends it to the
Distributor.
o The net asset value of each class of shares is determined as of the
close of The New York Stock Exchange, on each day the Exchange is open for
trading (referred to in this Prospectus as a "regular business day"). The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some days. All references to time in this Prospectus mean "New York time".
The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class by the number of shares of that class
that are outstanding. Under a policy adopted by the Fund's Board of Directors,
the Fund uses the amortized cost method to value its securities to determine net
asset value.
o To receive the offering price for a particular day, in most cases the
Distributor or its designated agent must receive your order by the time of day
The New York Stock Exchange closes that day. If your order is received on a day
when the Exchange is closed or after it has closed the order will receive the
next offering price that is determined after your order is received.
o If you buy shares through a dealer, your dealer must receive the order
by the close of The New York Stock Exchange and transmit it to the Distributor
so that it is received before the Distributor's close of business on a regular
business day (normally 5:00 P.M.) to receive that day's offering price.
Otherwise, the order will receive the next offering price that is determined.
What Class of Shares Does the Fund Offer? The Fund offers investors one class of
shares. Those shares are considered to be Class A shares for the purposes of
exchanging them or reinvesting dividends among other Oppenheimer funds that
offer more than one class of shares.
Special Investor Services
AccountLink. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through
a service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or to transmit
dividends and distributions directly to your bank account. Please
call the Transfer Agent for more information.
You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer fund account you have already established by
calling the special PhoneLink number.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below for
details.
Can I Submit Transaction Requests by Fax? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1-800-525-7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1-800-533-3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1-800-525-7048.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
Reinvestment Privilege. If you redeem some or all of your Fund shares that were
purchased by reinvesting dividends from the Fund or another Oppenheimer fund
account (except Oppenheimer Cash Reserves) or by exchanging shares from another
Oppenheimer fund account on which you paid a sales charge, you have up to 6
months to reinvest all or part of the redemption proceeds in Class A shares of
other Oppenheimer funds without paying a sales charge. You must be sure to ask
the Distributor for this privilege when you send your payment.
Retirement Plans. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that can be used
by individuals and employers:
o Individual Retirement Accounts (IRAs), including regular IRAs, Roth
IRAs, rollover and Education IRAs.
o SEP-IRAs, which are Simplified Employee Pensions Plan IRAs for small
business owners or self-employed individuals.
o 403(b)(7) Custodial Plans, that are tax deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and charitable
organizations.
o 401(k) Plans, which are special retirement plans for businesses.
o Pension and Profit-Sharing Plans, designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business
day. Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer Agent. The Fund lets
you sell your shares by writing a letter, by using the Fund's checkwriting
privilege or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special situation,
such as due to the death of the owner or from a retirement plan account, please
call the Transfer Agent first, at 1-800-525-7048, for assistance.
o Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that also
require a signature guarantee):
o You wish to redeem $50,000 or more and receive a check o The redemption
check is not payable to all shareholders listed on
the account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different
owner or name
o Shares are being redeemed by someone (such as an Executor) other
than the owners
o Where Can I Have My Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions, including:
a U.S. bank, trust company, credit union or savings association, or by a foreign
bank that has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities association or a
clearing agency. If you are signing on behalf of a corporation, partnership or
other business or as a fiduciary, you must also include your title in the
signature.
o Retirement Plan Accounts. There are special procedures to sell shares in
an OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements apply to
distributions from retirement plans. You must submit a withholding form with
your redemption request to avoid delay in getting your money and if you do not
want tax withheld. If your employer holds your retirement plan account for you
in the name of the plan, you must ask the plan trustee or administrator to
request the sale of the Fund shares in your plan account.
o Sending Redemption Proceeds by Wire. While the Fund normally sends your
money by check, you can arrange to have the proceeds of the shares you sell sent
by Federal Funds wire to a bank account you designate. It must be a commercial
bank that is a member of the Federal Reserve wire system. The minimum redemption
you can have sent by wire is $2,500. There is a $10 fee for each wire. To find
out how to set up this feature on your account or to arrange a wire, call the
Transfer Agent at 1-800-852-8457.
How Do I Sell Shares by Mail? Write a "letter of instructions" that includes:
o Your name o The Fund's name o Your Fund account number (from your
account statement) o The dollar amount or number of shares to be redeemed
o Any special payment instructions o Any share certificates for the shares
you are selling o The signatures of all registered owners exactly as the
account is
registered, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
- ------------------------------------------------------------------------------
Use the following address for requests by mail:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OppenheimerFunds Services
- ------------------------------------------------------------------------------
P.O. Box 5270, Denver, Colorado 80217-5270
- ------------------------------------------------------------------------------
Send courier or express mail requests to:
- ------------------------------------------------------------------------------
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
How Do I Sell Shares by Telephone? You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price on a
regular business day, the Transfer Agent must receive your call by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held in an OppenheimerFunds
retirement plan account or under a share certificate by telephone.
o To redeem shares through a service representative, call
1-800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account. Are There
Limits on Amounts Redeemed by Telephone?
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
How Do I Write Checks Against My Account? To write checks against your Fund
account, request that privilege on your account Application, or contact the
Transfer Agent for signature cards. They must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish checkwriting in another
Oppenheimer fund, simply call 1-800-525-7048 to request checkwriting for an
account in this Fund with the same registration as the other account.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the Fund's bank or Custodian.
o Checkwriting privileges are not available for accounts holding shares
that are subject to a contingent deferred sales charge.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your account
value.
o You may not write a check that would require the Fund to redeem shares
that were purchased by check or Asset Builder Plan payments within the prior 10
days.
o Don't use your checks if you changed your Fund account number, until you
receive new checks.
Can I Sell Shares Through My Dealer? The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
Will I Pay a Sales Charge When I Sell My Shares? The Fund does not charge a
fee when you redeem shares of this Fund that you bought directly or by
reinvesting dividends or distributions from this Fund or another Oppenheimer
fund. Generally, you will not pay a fee when you redeem shares of this Fund
you bought by exchange of shares of another Oppenheimer fund. However,
o if you bought shares of this Fund by exchanging Class A shares of
another Oppenheimer fund that you bought subject to the Class A contingent
deferred sales charge, and
o those shares are still subject to the Class A contingent deferred sales
charge when you exchange them into this Fund, then
o you will pay the contingent deferred sales charge if you redeem those
shares from this Fund within 18 months of the purchase date of the shares of the
Fund you exchanged.
How to Exchange Shares
Shares of the Fund may be exchanged for Class A shares of certain Oppenheimer
funds. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them. After the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class of an Oppenheimer fund may be exchanged only
for shares of the same class in other Oppenheimer funds. For example, you can
exchange shares of this Fund only for Class A shares of another fund, and you
can exchange only Class A shares of another Oppenheimer fund for shares of this
Fund.
You may pay a sales charge when you exchange shares of this Fund. Because
shares of this Fund are sold without sales charge, in some cases you may pay a
sales charge when you exchange shares of this Fund for shares of other
Oppenheimer funds that are sold subject to a sales charge. You will not pay a
sales charge when you exchange shares of this Fund purchased by reinvesting
dividends or distributions from this Fund or other Oppenheimer funds (except
Oppenheimer Cash Reserves), or shares of this Fund purchased by exchange of
shares on which you paid a sales charge.
For tax purposes, exchanges of shares involve a sale of the shares of the
fund you own and a purchase of the shares of the other fund, which may result in
a capital gain or loss. Since shares of this Fund normally maintain a $1.00 net
asset value, in most cases you should not realize a capital gain or loss when
you sell or exchange your shares.
How Do I Submit Exchange Requests? Exchanges may be requested in writing or
by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
address on the Back Cover.
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457, or by using
PhoneLink for automated exchanges by calling 1-800-533-3310. Telephone exchanges
may be made only between accounts that are registered with the same name(s) and
address. Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
Are There Limitations on Exchanges? There are certain exchange policies you
should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that conforms to the policies
described above. It must be received by the close of The New York Stock Exchange
that day, which is normally 4:00 P.M. but may be earlier on some days. However,
either fund may delay the purchase of shares of the fund you are exchanging into
up to seven days if it determines it would be disadvantaged by a same-day
exchange. For example, the receipt of the multiple exchange requests form a
"market timer" might require a fund to sell securities at a disadvantageous time
and/or price.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests submitted
by a shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Directors at any time the Board believes it is in the Fund's
best interest to do so.
o Telephone Transaction Privileges for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless the
Transfer Agent receives cancellation instructions from an owner of the account.
o The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax identification
numbers and other account data or by using PINs, and by confirming such
transactions in writing. The Transfer Agent and the Fund will not be liable for
losses or expenses arising out of telephone instructions reasonably believed to
be genuine. n Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time to
time, the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o Payment for redeemed shares ordinarily is made in cash. It is forwarded
by check or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives redemption
instructions in proper form. However, under unusual circumstances determined by
the Securities and Exchange Commission, payment may be delayed or suspended. For
accounts registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
o The Transfer Agent may delay forwarding a check or processing a payment
via AccountLink or Federal Funds wire for recently purchased shares, but only
until the purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided if you
purchase shares by Federal Funds wire or certified check, or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o "Backup Withholding" of Federal income tax may be applied against
taxable dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends and Tax Information
Dividends. The Fund intends to declare dividends from net investment income each
regular business day and to pay those dividends to shareholders monthly on a
date selected by the Board of Directors. To maintain a net asset value of $1.00
per share, the Fund might withhold dividends or make distributions from capital
or capital gains. Daily dividends will not be declared or paid on newly
purchased shares until Federal Funds are available to the Fund from the purchase
payment for such shares.
Capital Gains. The Fund normally holds its securities to maturity and therefore
will not usually pay capital gains. Although the Fund does not seek capital
gains, it could realize capital gains on the sale of portfolio securities. If it
does, it may make distributions out of any net short-term or long-term capital
gains in December of each year. The Fund may make supplemental distributions of
dividends and capital gains following the end of its fiscal year.
What Choices Do I Have for Receiving Distributions? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
o Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains distributions in additional shares of the
Fund.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest long-term
capital gains distributions in the Fund while receiving dividends by check or
having them sent to your bank account through AccountLink.
o Receive All Distributions in Cash. You can elect to receive a check for all
dividends and long-term capital gains distributions or have them sent to your
bank through AccountLink.
o Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another Oppenheimer
fund account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Dividends paid from net investment income and short-term capital gains are
taxable as ordinary income. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders, and may be taxable at different
rates depending on how long the Fund holds the asset. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of each taxable distribution you received in the previous year. Any
long-term capital gains distributions will be separately identified in the tax
information the Fund sends you after the end of the calendar year.
n Remember There May be Taxes on Transactions. Because the Fund seeks to
maintain a stable $1.00 per share net asset value, it is unlikely that you will
have a capital gain or loss when you sell or exchange your shares. A capital
gain or loss is the difference between the price you paid for the shares and the
price you received when you sold them. Any capital gain is subject to capital
gains tax.
n Returns of Capital Can Occur. In certain cases, distributions made by
the Fund may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal tax information
about your investment. You should consult with your tax adviser about the effect
of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past fiscal 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors, whose report, along with the Fund's financial statements, is included
in the Statement of Additional Information, which is available on request.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1998 1997 1996(1) 1995 1994 1993
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income and net
realized gain .05 .05 .03 .05 .04 .03
Dividends and distributions to
shareholders (.05) (.05) (.03) (.05) (.04) (.03)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
====================================================================================================================
TOTAL RETURN(2) 5.03% 4.83% 2.80% 5.40% 3.76% 2.71%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1,195 $1,014 $1,102 $818 $929 $611
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,114 $1,011 $ 901 $855 $804 $653
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.89% 4.73% 4.68%(3) 5.19% 3.79% 2.65%
Expenses 0.87% 0.87% 0.84%(3) 0.90% 0.82% 0.87%
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Total returns are not
annualized for periods of less than one full year. Total returns reflect changes
in net investment income only.
3. Annualized.
2
<PAGE>
Oppenheimer Money Market Fund, Inc.
For More Information:
The following additional information about the Fund is available without charge
upon request:
Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1-800-SEC-0330) or the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by
writing to the SEC's Public Reference Section, Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
SEC File No. 811-2454 (logo)OppenheimerFunds Distributor, Inc.
PR0200.001.1198 Printed on recycled paper
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER MONEY MARKET FUND, INC.
Graphic material included in Prospectus of Oppenheimer Money Market
Fund, Inc.: "Annual Total Returns (Class A) (% as of 12/31 each year)."
A bar chart will be included in the Prospectus of Oppenheimer Money Market
Fund, Inc. (the "Fund") depicting the annual total returns of a hypothetical
investment in Class A shares of the Fund for each of the ten most recent
calendar years without deducting sales charges. Set forth below are the relevant
data points that will appear on the bar chart.
Calendar Oppenheimer
Year Money Market Fund, Inc.
Ended Class A Shares
12/31/88 7.14%
12/31/89 8.88%
12/31/90 7.99%
12/31/91 5.87%
12/31/92 3.47%
12/31/93 2.71%
12/31/94 3.76%
12/31/95 5.40%
12/31/96 4.78%
12/31/97 4.94%
<PAGE>
- ------------------------------------------------------------------------------
Oppenheimer Money Market Fund, Inc.
- ------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated November 27, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated November 27, 1998. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217, by calling the Transfer Agent at the toll-free number shown above, or by
downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information about the Fund's Investment Policies and Risks........2
The Fund's Investment Policies..........................................2
Other Investment Strategies.............................................6
Investment Restrictions.................................................8
How the Fund is Managed.....................................................10
Organization and History...............................................10
Directors and Officers of the Fund.....................................10
The Manager............................................................16
Performance of the Fund.....................................................18
About Your Account
How To Buy Shares...........................................................21
How To Sell Shares..........................................................23
How To Exchange Shares......................................................27
Dividends and Taxes.........................................................29
Additional Information About the Fund.......................................30
Financial Information About the Fund
Independent Auditors' Report................................................32
Financial Statements........................................................33
Appendix A: Securities Ratings.............................................A-1
Appendix B: Industry Classifications.......................................B-1
<PAGE>
- ------------------------------------------------------------------------------
ABOUT THE FUND
- ------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective and the principal investment policies of the Fund are
described in the Prospectus. This Statement of Additional Information contains
supplemental information about those policies and the types of securities that
the Fund's investment Manager, OppenheimerFunds, Inc. will select for the Fund.
Additional explanations are also provided about the strategies the Fund may use
to try to achieve its objective.
The Fund's Investment Policies. The Fund's objective is to seek the maximum
current income that is consistent with stability of principal. The Fund will not
make investments with the objective of seeking capital growth. However, the
value of the securities held by the Fund may be affected by changes in general
interest rates. Because the current value of debt securities varies inversely
with changes in prevailing interest rates, if interest rates increase after a
security is purchased, that security would normally decline in value.
Conversely, if interest rates decrease after a security is purchased, its value
would rise. However, those fluctuations in value will not generally result in
realized gains or losses to the Fund since the Fund does not usually intend to
dispose of securities prior to their maturity. A debt security held to maturity
is redeemable by its issuer at full principal value plus accrued interest.
The Fund may sell securities prior to their maturity, to attempt to take
advantage of short-term market variations, or because of a revised credit
evaluation of the issuer or other considerations. The Fund may also do so to
generate cash to satisfy redemptions of Fund shares. In such cases, the Fund may
realize a capital gain or loss on the security.
|X| Ratings of Securities -- Portfolio Quality, Maturity and
Diversification. Under Rule 2a-7 of the Investment Company Act, the Fund uses
the amortized cost method to value its portfolio securities to determine the
Fund's net asset value per share. Rule 2a-7 places restrictions on a money
market fund's investments. Under that Rule, the Fund may purchase only those
securities that the Manager, under Board-approved procedures, has determined
have minimal credit risks and are "Eligible Securities." The rating restrictions
described in the Prospectus and this Statement of Additional Information do not
apply to banks in which the Fund's cash is kept.
An "Eligible Security" is one that has been rated in one of the two
highest short-term rating categories by any two "nationally-recognized
statistical rating organizations." That term is defined in Rule 2a-7 and they
are referred to as "Rating Organizations" in this Statement of Additional
Information. If only one Rating Organization has rated that security, it must
have been rated in one of the two highest rating categories by that Rating
Organization. An unrated security that is judged by the Manager to be of
comparable quality to Eligible Securities rated by Rating Organizations may also
be an "Eligible Security."
Rule 2a-7 permits the Fund to purchase any number of "First Tier
Securities." These are Eligible Securities that have been rated in the highest
rating category for short-term debt obligations by at least two Rating
Organizations. If only one Rating Organization has rated a particular security,
it must have been rated in the highest rating category by that Rating
Organization. Comparable unrated securities may also be First Tier Securities.
Under Rule 2a-7, the Fund may invest only up to 5% of its total assets in
"Second Tier Securities." Those are Eligible Securities that are not "First Tier
Securities." In addition, the Fund may not invest more than:
|_| 5% of its total assets in the securities of any one issuer (other than
the U.S. Government, its agencies or instrumentalities) or |_| 1% of its
total assets or $1 million (whichever is greater) in Second Tier
Securities of any one issuer.
Under Rule 2a-7, the Fund must maintain a dollar-weighted average
portfolio maturity of not more than 90 days, and the maturity of any single
portfolio investment may not exceed 397 days. The Board regularly reviews
reports from the Manager to show the Manager's compliance with the Fund's
procedures and with the Rule.
If a security's rating is downgraded, the Manager and/or the Board may
have to reassess the security's credit risk. If a security has ceased to be a
First Tier Security, the Manager will promptly reassess whether the security
continues to present minimal credit risk. If the Manager becomes aware that any
Rating Organization has downgraded its rating of a Second Tier Security or rated
an unrated security below its second highest rating category, the Fund's Board
of Directors shall promptly reassess whether the security presents minimal
credit risk and whether it is in the best interests of the Fund to dispose of
it. If the Fund disposes of the security within five days of the Manager
learning of the downgrade, the Manager will provide the Board with subsequent
notice of such downgrade. If a security is in default, or ceases to be an
Eligible Security, or is determined no longer to present minimal credit risks,
the Board must determine whether it would be in the best interests of the Fund
to dispose of the security.
The Rating Organizations currently designated as nationally-recognized
statistical rating organizations by the Securities and Exchange Commission are
Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch IBCA ,
Inc., Duff and Phelps, Inc., and Thomson BankWatch, Inc. Appendix A to this
Statement of Additional Information contains descriptions of the rating
categories of those Rating Organizations. Ratings at the time of purchase will
determine whether securities may be acquired under the restrictions described
above.
|X| U.S. Government Securities. U.S. Government Securities are
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. They include Treasury Bills (which mature within one year
of the date they are issued) and Treasury Notes and Bonds (which are issued
with longer maturities). All Treasury securities are backed by the full
faith and credit of the United States.
U.S. Government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Bank for Cooperatives, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks, Maritime Administration, the Tennessee Valley Authority and the District
of Columbia Armory Board.
Securities issued or guaranteed by U.S. Government agencies and
instrumentalities are not always backed by the full faith and credit of the
United States. Some, such as securities issued by the Federal National Mortgage
Association ("Fannie Mae"), are backed by the right of the agency or
instrumentality to borrow from the Treasury. Others, such as securities issued
by the Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported
only by the credit of the instrumentality and not by the Treasury. If the
securities are not backed by the full faith and credit of the United States, the
purchaser must look principally to the agency issuing the obligation for
repayment and may not be able to assert a claim against the United States if the
issuing agency or instrumentality does not meet its commitment.
Among the U.S. Government Securities that may be purchased by the Fund are
"mortgage-backed securities" of Fannie Mae, Government National Mortgage
Association ("Ginnie Mae") and Freddie Mac. Timely payment of principal and
interest on Ginnie Mae pass-throughs is guaranteed by the full faith and credit
of the United States. These mortgage-backed securities include "pass-through"
securities and "participation certificates." Both types of securities are
similar, in that they represent pools of mortgages that are assembled by a
vendor who sells interests in the pool. Payments of principal and interest by
individual mortgagors are "passed through" to the holders of the interests in
the pool. Another type of mortgage-backed security is the "collateralized
mortgage obligation." It is similar to a conventional bond and is secured by
groups of individual mortgages.
|X| Time Deposits and Other Bank Obligations. The types of "banks" whose
securities the Fund may buy include commercial banks, savings banks, and savings
and loan associations, which may or may not be members of the Federal Deposit
Insurance Corporation. The Fund may also buy securities of "foreign banks" that
are:
|_| foreign branches of U.S. banks ( which may be issuers of
"Eurodollar" money market instruments),
|_| U.S. branches and agencies of foreign banks (which may be issuers
of "Yankee dollar" instruments), or
|_| foreign branches of foreign banks.
The Fund may invest in fixed time deposits. These are non-negotiable
deposits in a bank for a specified period of time at a stated interest rate.
They may or may not be subject to withdrawal penalties. However, the Fund's
investments in time deposits that are subject to penalties (other than time
deposits maturing in less than 7 days) are subject to the 10% investment
limitation for investing in illiquid securities, set forth in "Illiquid and
Restricted Securities" in the Prospectus.
|X| Insured Bank Obligations. The Federal Deposit Insurance Corporation
insures the deposits of banks and savings and loan associations up to $100,000
per investor. Within the limits set forth in the Prospectus, the Fund may
purchase bank obligations that are fully insured as to principal by the FDIC. To
remain fully insured as to principal, these investments must currently be
limited to $100,000 per bank. If the principal amount and accrued interest
together exceed $100,000, then the accrued interest in excess of that $100,000
will not be insured.
|X| Bank Loan Participation Agreements. The Fund may invest in bank loan
participation agreements, subject to the investment limitation set forth in the
Prospectus as to investments in illiquid securities. Participation agreements
provide an undivided interest in a loan made by the bank issuing the
participation interest in the proportion that the buyer's investment bears to
the total principal amount of the loan. Under this type of arrangement, the
issuing bank may have no obligation to the buyer other than to pay principal and
interest on the loan if and when received by the bank. Thus, the Fund must look
to the creditworthiness of the borrower, which is obligated to make payments of
principal and interest on the loan. If the borrower fails to pay scheduled
principal or interest payments, the Fund may experience a reduction in income.
|X| Asset-Backed Securities. These securities, issued by trusts and
special purpose corporations, are backed by pools of assets, primarily
automobile and credit-card receivables and home equity loans. They pass through
the payments on the underlying obligations to the security holders (less
servicing fees paid to the originator or fees for any credit enhancement). The
value of an asset-backed security is affected by changes in the market's
perception of the asset backing the security, the creditworthiness of the
servicing agent for the loan pool, the originator of the loans, or the financial
institution providing any credit enhancement.
Payments of principal and interest passed through to holders of
asset-backed securities are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee by
another entity or having a priority to certain of the borrower's other
securities. The degree of credit enhancement varies, and generally applies to
only a fraction of the asset-backed security's par value until exhausted. If the
credit enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest are not made
with respect to the underlying loans, the Fund may experience losses or delays
in receiving payment.
The risks of investing in asset-backed securities are ultimately dependent
upon payment of consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The underlying
loans are subject to prepayments, which shorten the weighted average life of
asset-backed securities and may lower their return, in the same manner as for
prepayments of a pool of mortgage loans underlying mortgage-backed securities.
However, asset-backed securities do not have the benefit of the same security
interest in the underlying collateral as do mortgage-backed securities.
|X| Repurchase Agreements. In a repurchase transaction, the Fund acquires
a security from, and simultaneously resells it to, an approved vendor for
delivery on an agreed-upon future date. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. An "approved vendor"
may be a U.S. commercial bank, the U.S. branch of a foreign bank, or a
broker-dealer which has been designated a primary dealer in government
securities. These entities must meet the credit requirements set forth by the
Fund's Board of Directors from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days of the
purchase. The Fund will not enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase agreements maturing
in more than seven days.
Repurchase agreements are considered "loans" under the Investment Company
Act, collateralized by the underlying security. The Fund's repurchase agreements
require that at all times while the repurchase agreement is in effect, the
collateral's value must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is financially sound
and will continuously monitor the collateral's value. However, if the vendor
fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in
its ability to do so.
Other Investment Strategies
O Floating Rate/Variable Rate Obligations. The Fund may invest in
instruments with floating or variable interest rates. The interest rate on a
floating rate obligation is based on a stated prevailing market rate, such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of return on
commercial paper or bank certificates of deposit, or some other standard. The
rate on the investment is adjusted automatically each time the market rate is
adjusted. The interest rate on a variable rate obligation is also based on a
stated prevailing market rate but is adjusted automatically at a specified
interval of not less than one year. Some variable rate or floating rate
obligations in which the Fund may invest have a demand feature entitling the
holder to demand payment of an amount approximately equal to the amortized cost
of the instrument or the principal amount of the instrument plus accrued
interest at any time, or at specified intervals not exceeding one year. These
notes may or may not be backed by bank letters of credit.
Variable rate demand notes may include master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts in a note. The
amount may change daily without penalty, pursuant to direct arrangements between
the Fund, as the note purchaser, and the issuer of the note. The interest rates
on these notes fluctuate from time to time. The issuer of this type of
obligation normally has a corresponding right in its discretion, after a given
period, to prepay the outstanding principal amount of the obligation plus
accrued interest. The issuer must give a specified number of days' notice to the
holders of those obligations. Generally, the changes in the interest rate on
those securities reduce the fluctuation in their market value. As interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations having the same maturity.
Because these types of obligations are direct lending arrangements between
the note purchaser and issuer of the note, these instruments generally will not
be traded. Generally, there is no established secondary market for these types
of obligations, although they are redeemable from the issuer at face value.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to redeem them is dependent
on the ability of the note issuer to pay principal and interest on demand. These
types of obligations usually are not rated by credit rating agencies. The Fund
may invest in obligations that are not rated only if the Manager determines at
the time of investment that the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Manager, on behalf of the
Fund, will monitor the creditworthiness of the issuers of the floating and
variable rate obligations in the Fund's portfolio on an ongoing basis.
O Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions. These loans are limited to not more than 10% of the value of the
Fund's total assets and are subject to other conditions described below. There
are some risks in lending securities. The Fund could experience a delay in
receiving additional collateral to secure a loan, or a delay in recovering the
loaned securities. The Fund presently does not intend to lend its securities,
but if it does, the value of securities loaned is not expected to exceed 5% of
the value of the Fund's total assets.
The Fund may receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the market value of the loaned
securities. The collateral must consist of cash, bank letters of credit, U.S.
Government securities or other cash equivalents in which the Fund is permitted
to invest. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives from the borrower an amount
equal to the interest paid or the dividends declared on the loaned securities
during the term of the loan. It may also receive negotiated loan fees and the
interest on the collateral securities, less any finders', custodian,
administrative or other fees the Fund pays in connection with the loan. The Fund
may share the interest it receives on the collateral securities with the
borrower as long as it realizes at least a minimum amount of interest required
by the lending guidelines established by its Board of Directors.
The Fund will not lend its portfolio securities to any officer, Director,
employee or affiliate of the Fund or its Manager. The terms of the Fund's loans
must meet certain tests under the Internal Revenue Code and permit the Fund to
reacquire loaned securities on five business days notice or in time to vote on
any important matter.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Directors, the Manager determines the
liquidity of certain of the Fund's investments. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933.
Illiquid securities the Fund can buy include issues that may be redeemed
only by the issuer upon more than seven days notice or at maturity, repurchase
agreements maturing in more than seven days, fixed time deposits subject to
withdrawal penalties which mature in more than seven days, and other securities
that cannot be sold freely due to legal or contractual restrictions on resale.
Contractual restrictions on the resale of illiquid securities might prevent or
delay their sale by the Fund at a time when such sale would be desirable.
There are restricted securities that are not illiquid that the Fund can
buy. They include certain master demand notes redeemable on demand, and
short-term corporate debt instruments that are not related to current
transactions of the issuer and therefore are not exempt from registration as
commercial paper. Illiquid securities include repurchase agreements maturing in
more than 7 days, or certain participation interests other than those with puts
exercisable within 7 days.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding shares
are present or represented by proxy, or
|_| more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Directors
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The
following investment restrictions are fundamental policies of the Fund:
|_| The Fund cannot invest more than 5% of its total assets in securities
of any issuer (except the U.S. Government or its agencies or instrumentalities).
|_| The Fund cannot concentrate investments in any particular industry;
therefore the Fund will not purchase the securities of companies in any one
industry if more than 25% of the value of the Fund's total assets would consist
of securities of companies in that industry. Except for obligations of foreign
branches of domestic banks, or obligations issued or guaranteed by foreign
banks, the Fund's investments in U.S. government securities and bank obligations
described in the prospectus are not included in this limitation.
|_| The Fund cannot make loans, except through the purchase of the types
of debt securities described in the Prospectus or through repurchase agreements;
the Fund may also lend securities as described under "Loans of Portfolio
Securities" in this Statement of Additional Information.
|_| The Fund cannot borrow money in excess of 5% of the value of its total
assets. The Fund may borrow only as a temporary measure for extraordinary or
emergency purposes and no assets of the Fund may be pledged, mortgaged or
assigned to secure a debt.
|_| The Fund cannot invest more than 5% of the value of its total assets
in securities of companies that have operated less than three years, including
the operations of predecessors.
|_| The Fund cannot invest in commodities or commodity contracts or invest
in interests in oil, gas, or other mineral exploration or mineral development
programs.
|_| The Fund cannot invest in real estate. However, the Fund may purchase
commercial paper issued by companies which invest in real estate or interests in
real estate.
|_| The Fund cannot purchase securities on margin or make short sales of
securities.
|_| The Fund cannot invest in or hold securities of any issuer if those
officers and directors of the Fund or its advisor who beneficially own
individually more than 1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer;
|_| The Fund cannot underwrite securities of other companies.
o The Fund cannot invest in securities of other investment companies.
The Fund currently has an operating policy (which is not a fundamental
policy but will not be changed without the approval of a shareholder vote) that
prohibits the Fund from issuing senior securities. However, that policy does not
prohibit certain activities that are permitted by the Fund's other policies,
including borrowing money for emergency purposes as permitted by its other
investment policies and applicable regulations.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. The Fund need not sell securities to meet
the percentage limits if the value of the investment increases in proportion to
the size of the Fund.
For purposes of the Fund's policy not to concentrate its investments in
securities of issuers, the Fund has adopted the industry classifications set
forth in Appendix B to this Statement of Additional Information. This is not
a fundamental policy.
How the Fund Is Managed
Organization and History. The Fund is a corporation organized in Maryland in
1973. The Fund is a diversified, open-end management investment company. The
Fund is governed by a Board of Directors, which is responsible for protecting
the interests of shareholders under Maryland law. The Directors meet
periodically throughout the year to oversee the Fund's activities, review its
performance, and review the actions of the Manager.
The Fund has a single class of shares of stock. While that class has no
designation, it is deemed to be the equivalent of Class A for the purposes of
the shareholder account policies that apply to Class A shares of the Oppenheimer
Funds. Shares of the Fund are freely transferable. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally on matters
submitted to a vote of shareholders. There are no preemptive or conversion
rights and shares participate equally in the assets of the Fund upon
liquidation.
|_| Meetings of Shareholders. As a Maryland corporation, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Directors or upon proper request of the shareholders.
The Directors will call a meeting of shareholders to vote on the removal
of a Director upon the written request of the record holders of 10% of its
outstanding shares. If the Directors receive a request from at least 10
shareholders stating that they wish to communicate with other shareholders to
request a meeting to remove a Director, the Directors will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense. The shareholders making
the request must have been shareholders for at least six months and must hold
shares of the Fund valued at $25,000 or more or constituting at least 1% of the
Fund's outstanding shares, whichever is less, The Directors may take such other
action as is permitted under the Investment Company Act.
Directors and Officers of the Fund. The Fund's Directors and officers and their
principal occupations and business affiliations during the past five years are
listed below. Directors denoted with an asterisk (*) below are deemed to be
"interested persons" of the Fund under the Investment Company Act. All of the
Directors are trustees or directors of the following NewYork-based Oppenheimer
funds:
Oppenheimer California Municipal Fund
Oppenheimer International Small Company Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Developing Markets Fund Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund Oppenheimer Multi-State Municipal Trust
Oppenheimer Enterprise Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Global Fund Oppenheimer Municipal Bond Fund
Oppenheimer Global Growth & Income Fund Oppenheimer New York Municipal Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Series Fund, Inc.
Oppenheimer Growth Fund Oppenheimer U.S. Government Trust and
Oppenheimer International Growth Fund Oppenheimer World Bond Fund
Ms. Macaskill and Messrs. Spiro, Bishop, Bowen, Donohue, Farrar and Zack,
who are officers of the Fund, respectively hold the same offices with the other
New York-based Oppenheimer funds as with the Fund. As of November 2, 1998, the
Directors and officers of the Fund as a group owned 3.7% of the outstanding
shares of the Fund. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the Manager, other
than the shares beneficially owned under that plan by the officers of the Fund
listed below. Ms. Macaskill and Mr. Donohue, are trustees of that plan.
Leon Levy, Chairman of the Board of Directors; Age 73
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership)(since
1982) and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Director; Age 65
19750 Beach Road, Jupiter Island, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc.(October 1995 to
December 1997); Vice President and General Counsel of Oppenheimer Acquisition
Corp., the Manager's parent holding company (June 1990 to March 1994); Executive
Vice President (December 1977 to October 1995), General Counsel and a director
(December 1975 to October 1993) of the Manager; Executive Vice President and a
director (July 1978 to October 1993) and General Counsel of the Distributor,
OppenheimerFunds Distributor, Inc.; Executive Vice President and a director
(April 1986 to October 1995) of HarbourView Asset Management Corporation; Vice
President and a director (October 1988 to October 1993) of Centennial Asset
Management Corporation ( HarbourView and Centennial are investment adviser
subsidiaries of the Manager); and an officer of other Oppenheimer funds.
Benjamin Lipstein, Director; Age 75
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Elizabeth B. Moynihan, Director; Age 69
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York University), and
the National Building Museum; a member of the Trustees Council, Preservation
League of New York State, and of the Indo-U.S. Sub-Commission on Education and
Culture.
Kenneth A. Randall, Director; Age 71
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texan
Cogeneration Company (cogeneration company), and Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Director; Age 68
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of River Bank America (real estate
manager); Trustee, Financial Accounting Foundation (FASB and GASB); formerly New
York State Comptroller and trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Director; Age 66
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive recruiting);
Chairman of Directorship Inc. (corporate governance consulting); a director
of Professional Staff Limited (U.K); a trustee of Mystic Seaport Museum,
International House and Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Director*; Age 72
Two World Trade Center, 34th Floor, New York, NY 10048
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
Pauline Trigere, Director; Age 86
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
Clayton K. Yeutter, Director; Age 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T. Industries,
Ltd. (tobacco and financial services), Caterpillar, Inc. (machinery),
ConAgra, Inc. (food and agricultural products), Farmers Insurance Company
(insurance), FMC Corp. (chemicals and machinery) and Texas Instruments, Inc.
(electronics); formerly (in descending chronological order) Counsellor to the
President (Bush) for Domestic Policy, Chairman of the Republican National
Committee, Secretary of the U.S. Department of Agriculture, and U.S. Trade
Representative.
Bridget A. Macaskill, President; Age 50
Two World Trade Center, 34th Floor, New York, NY 10048
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of Shareholder Services, Inc.
(since August 1994), and Shareholder Financial Services, Inc. (September 1995)
(both are transfer agent subsidiaries of the Manager); President (since
September 1995) and a director (since October 1990) of Oppenheimer Acquisition
Corp.; President (since September 1995) and a director (since November 1989) of
Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the
Manager; a director (since July 1996) of Oppenheimer Real Asset Management,
Inc., an investment advisory subsidiary of the Manager; President and a director
(since October 1997) of OppenheimerFunds International Ltd., an offshore fund
manager subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc;
President and a director of other Oppenheimer funds; a director of Hillsdown
Holdings plc (a U.K. food company); formerly a director (until 1998) of NASDAQ
Stock Market, Inc. and an Executive Vice President of the Manager.
Carol E. Wolf, Vice President and Portfolio Manager; Age 46
6803 South Tucson Way, Englewood, CO 80112
Vice President of the Manager and Centennial Asset Management Corporation; an
officer of other Oppenheimer funds.
Arthur J. Zimmer, Vice President and Portfolio Manager; Age 52 6803 South Tucson
Way, Englewood, CO 80112 Senior Vice President of the Manager and Vice President
of Centennial Asset Management Corporation; an officer of other Oppenheimer
funds.
Andrew J. Donohue, Secretary; Age 48
Two World Trade Center, 34th Floor, New York, NY 10048
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corp., Shareholder Services, Inc,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since (September 1995); President and a director of Centennial Asset Management
Corp.(since September 1995); President and a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); General Counsel (since May 1996) and
Secretary (since April 1997) of Oppenheimer Acquisition Corp.; Vice President
and a director of OppenheimerFunds International Ltd. and Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
George C. Bowen, Treasurer; Age 62
6803 South Tucson Way, Englewood, CO 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView Asset Management Corp.; Senior Vice President (since
February 1992), Treasurer (since July 1991) and a director (since December 1991)
of Centennial Asset Management Corp.; Vice President and Treasurer (since August
1978) and Secretary (since April 1981) of Shareholder Services, Inc.; Vice
President, Treasurer and Secretary of Shareholder Financial Services, Inc.
(since November 1989); Assistant Treasurer of Oppenheimer Acquisition Corp.
(since March 1998); Treasurer of Oppenheimer Partnership Holdings, Inc. (since
November 1989); Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996); an officer of other Oppenheimer funds;
formerly Treasurer (June 1990 - March 1998) of Oppenheimer Acquisition Corp.
Robert J. Bishop, Assistant Treasurer; Age 40
6803 South Tucson Way, Englewood, CO 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager.
Scott T. Farrar, Assistant Treasurer; Age 33
6803 South Tucson Way, Englewood, CO 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age 50
Two World Trade Center, 34th Floor, New York, NY 10048
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc.
(since May 1985), and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary of Oppenheimer Millennium Funds plc and
OppenheimerFunds International Ltd. (since October 1997); an officer of other
Oppenheimer funds.
O Remuneration of Directors. The officers of the Fund and a Director of
the Fund (Mr. Spiro) who are affiliated with the Manager receive no salary or
fee from the Fund. The remaining Directors of the Fund received the compensation
shown below. The compensation from the Fund was paid during its fiscal year
ended July 31, 1998. The compensation from all of the New York-based Oppenheimer
funds includes the Fund and is compensation received as a director, trustee or
member of a committee of the Board during the calendar year 1997.
<PAGE>
--------------------------------------------------------------------------
Total
Retirement Compensation
Benefits from all
Aggregate Accrued New York-Based
Director's Compensation as Fund Oppenheimer
Name and Position from Fund Expenses Funds1 (20 Funds)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Leon Levy $21,427 $12,898 $158,500
Chairman
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Robert G. Galli $2,877 None None
Study Committee
Member2
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Benjamin Lipstein $26,522 $19,150 $137,000
Study Committee
Chairman3 Audit
Committee Member
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Elizabeth B. $5,193 None $96,500
Moynihan
Study Committee
Member
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Kenneth A. Randall $13,469 $8,706 $88,500
Audit Committee
Chairman
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Edward V. Regan $4,711 None $87,500
Proxy Committee
Chairman, Audit
Committee Member
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Russell S. $5,850 $2,325 $65,500
Reynolds, Jr.
Proxy Committee
Member
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Pauline Trigere $9,535 $6,388 $58,500
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Clayton K. Yeutter $3,5254 None $65,500
Proxy Committee
Member
--------------------------------------------------------------------------
(1) For the 1997 calendar year.
(2) Reflects fees from 1/1/98 to 7/31/98.
(3) Committee position held during a portion of the period shown. (4) Includes
$504 deferred under Deferred Compensation Plan described below.
o Deferred Compensation Plan for Directors. The Board of Directors
has adopted a Deferred Compensation Plan for disinterested directors that
enables them to elect to defer receipt of all or a portion of the annual fees
they are entitled to receive from the Fund. Under the plan, the compensation
deferred by a Director is periodically adjusted as though an equivalent amount
had been invested in shares of one or more Oppenheimer funds selected by the
Director. The amount paid to the Director under this plan will be determined
based upon the performance of the selected funds.
Deferral of Directors' fees under this plan will not materially affect the
Fund's assets, liabilities or net income per share. This plan will not obligate
the Fund to retain the services of any Director or to pay any particular level
of compensation to any Director. Pursuant to an Order issued by the Securities
and Exchange Commission, the Fund may invest in the funds selected by the
Director under this plan without shareholder approval for the limited purpose of
determining the value of the Directors' deferred fee accounts.
|X| Retirement Plan for Directors. The Fund has adopted a retirement plan
that provides for payment to retired Directors. Payments are up to 80% of the
average compensation paid during a Director's five years of service in which the
highest compensation was received. A Director must serve as trustee or director
for any of the New York-based OppenheimerFunds for at least 15 years to be
eligible for the maximum payment. Each Director's retirement benefits will
depend on the amount of the Director's future compensation and length of
service. Therefore, the amount of those benefits cannot be determined at this
time, nor can we estimate the number of years of credited service that will be
used to determine those benefits.
|X| Major Shareholders. As of November 2, 1998, the only person who owned
of record or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding shares was OppenheimerFunds Distributor, Inc. which owned
74,653,717,660 shares, which was 5.51% of the outstanding shares of the Fund on
that date, for its own account.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. The
Manager and the Fund have a Code of Ethics. It is designed to detect and prevent
improper personal trading by certain employees, including portfolio managers,
that would compete with or take advantage of the Fund's portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The portfolio managers of the Fund are principally responsible for the
day-to-day management of the Fund's investment portfolio. Other members of the
Manager's fixed-income portfolio department, particularly security analysts,
traders and other portfolio managers, have broad experience with fixed-income
securities. They provide the Fund's portfolio managers with research and support
in managing the Fund's investments.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The agreement requires
the Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment. It also requires the Manager to provide and supervise
the activities of all administrative and clerical personnel required to provide
effective administration for the Fund. Those responsibilities include the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy materials
and registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the investment
advisory agreement are paid by the Fund. The investment advisory agreement lists
examples of expenses paid by the Fund. The major categories relate to interest,
taxes, fees to disinterested Directors, legal and audit expenses, custodian and
transfer agent expenses, share issuance costs, certain printing and registration
costs and non-recurring expenses, including litigation costs. The management
fees paid by the Fund to the Manager are calculated at the rates described in
the Prospectus.
Under the investment advisory agreement, the Manager guarantees that the
total expenses of the Fund in any calendar year, exclusive of taxes, interest
and any brokerage fees, shall not exceed the lesser of (a) 1% of the average
annual net assets of the Fund, or (b) 25% of the total annual investment income
of the Fund. The Manager undertakes to pay or refund to the Fund any amount by
which such expenses shall exceed those limits. The payment of the management fee
at the end of any month will be reduced so that at no time will there be any
accrued but unpaid liability under this expense limitation.
---------------------------------------------------------------------------
Fiscal Year Management Fee Paid to OppenheimerFunds, Inc.
ending 7/31
---------------------------------------------------------------------------
---------------------------------------------------------------------------
1996 $2,296,019
(7 months)
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---------------------------------------------------------------------------
1997 $4,413,500
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---------------------------------------------------------------------------
1998 $4,829,036
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The investment advisory agreement contains an indemnity of the Manager.
The Manager is not liable for any loss sustained by reason of the adoption of
any investment policy or the purchase, sale or retention of any security on its
recommendation, whether or not such recommendation shall have been based on its
own investigation and research or upon investigation and research by any other
individual, firm or corporation. That recommendation must have been made, and
such other individual, firm or corporation must have been selected, with due
care and in good faith. However, the Manager is not excused from liability for
its willful misfeasance, bad faith or gross negligence in the performance of its
duties, or its reckless disregard of its obligations and duties, under the
investment advisory agreement.
The investment advisory agreement permits the Manager to act as investment
advisor for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with other investment companies for which it may act
as investment advisor or general distributor. If the Manager shall no longer act
as investment advisor to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
|X| The Distributor. Under its General Distributor's Agreement with the
Fund, OppenheimerFunds Distributor, Inc., a subsidiary of the Manager, acts as
the Fund's principal underwriter and Distributor in the continuous public
offering of the Fund's shares. The Distributor is not obligated to sell a
specific number of shares. The Distributor bears the expenses normally
attributable to sales, including advertising and the cost of printing and
mailing prospectuses, other than those furnished to existing shareholders.
Portfolio Transactions. Portfolio decisions are based upon recommendations and
judgment of the Manager subject to the overall authority of the Board of
Directors. Most purchases made by the Fund are principal transactions at net
prices, so the Fund incurs little or no brokerage costs. The Fund deals directly
with the selling or purchasing principal or market maker without incurring
charges for the services of a broker on its behalf unless the Manager determines
that a better price or execution may be obtained by using the services of a
broker. Purchases of portfolio securities from underwriters include a commission
or concession paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked prices.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. If dealers are used for portfolio transactions, transactions may be
directed to dealers for their execution and research services. The research
services provided by a particular broker may be useful only to one or more of
the advisory accounts of the Manager and its affiliates. Investment research
received for the commissions of those other accounts may be useful both to the
Fund and one or more of such other accounts. Investment research services may be
supplied to the Manager by a third party at the instance of a broker through
which trades are placed. It may include information and analyses on particular
companies and industries as well as market or economic trends and portfolio
strategy, receipt of market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Manager in a non-research capacity (such as bookkeeping
or other administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process may
be paid in commission dollars.
The research services provided by brokers broaden the scope and supplement
the research activities of the Manager. That research provides additional views
and comparisons for consideration, and helps the Manager obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase.
Subject to applicable rules covering the Manager's activities in this
area, sales of shares of the Fund and/or the other investment companies managed
by the Manager or distributed by the Distributor may also be considered as a
factor in the direction of transactions to dealers. That must be done in
conformity with the price, execution and other considerations and practices
discussed above. Those other investment companies may also give similar
consideration relating to the sale of the Fund's shares. No portfolio
transactions will be handled by any securities dealer affiliated with the
Manager.
The Fund's policy of investing in short-term debt securities with maturity
of less than one year results in high portfolio turnover and may increase the
Fund's transaction costs. However, since brokerage commissions, if any, are
small, high turnover does not have an appreciable adverse effect upon the income
of the Fund.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "yield," "compounded effective
yield" and "average annual total return." An explanation of how yields and total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7948
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. If the fund shows total returns in addition to its yields, the
returns must be for the 1-, 5- and 10-year periods ending as of the most recent
calendar quarter prior to the publication of the advertisement (or its
submission for publication).
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparisons with other
investments:
|_| Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance
of each shareholder's account. Your account's performance will vary from
the model performance data if your dividends are received in cash, or you
buy or sell shares during the period, or you bought your shares at a
different time than the shares used in the model. |_| An investment in the
Fund is not insured by the FDIC or any other
government agency.
|_| The Fund's yield is not fixed or guaranteed and will fluctuate.
|_| Yields and total returns for any given past period represent
historical performance information and are not, and should not be considered, a
prediction of future yields or returns.
|_| Yields. The Fund's current yield is calculated for a seven-day period
of time as follows. First, a base period return is calculated for the seven-day
period by determining the net change in the value of a hypothetical pre-existing
account having one share at the beginning of the seven-day period. The change
includes dividends declared on the original share and dividends declared on any
shares purchased with dividends on that share, but such dividends are adjusted
to exclude any realized or unrealized capital gains or losses affecting the
dividends declared. Next, the base period return is multiplied by 365/7 to
obtain the current yield to the nearest hundredth of one percent.
The compounded effective yield for a seven-day period is calculated by (1)
adding 1 to the base period return (obtained as described above), (2)
raising the sum to a power equal to 365 divided by 7, and (3) subtracting
1 from the result.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. The calculation of yield under either
procedure described above does not take into consideration any realized or
unrealized gains or losses on the Fund's portfolio securities which may affect
dividends. Therefore, the return on dividends declared during a period may not
be the same on an annualized basis as the yield for that period.
o Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. The cumulative
total return measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. The Fund uses standardized calculations for its total
returns as prescribed by the SEC.
The methodology is discussed below.
o Average Annual Total Return. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV" in the
formula) of that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
o Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
---------------------------------------------------------------------------
Yield Compounded Average Annual Total Returns (at 7/31/98)
(7 days ended Effective Yield
7/31/98) (7 days ended
7/31/98)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
1-Year 5 Years 10 Years
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4.85% 4.96% 5.03% 4.60% 5.40%
---------------------------------------------------------------------------
O Other Performance Comparisons. Yield information may be useful to
investors in reviewing the Fund's performance. The Fund may make comparisons
between its yield and that of other investments, by citing various indices such
as The Bank Rate Monitor National Index (provided by Bank Rate MonitorJ) which
measures the average rate paid on bank money market accounts, NOW accounts and
certificates of deposits by the 100 largest banks and thrifts in the top ten
metro areas. When comparing the Fund's yield with that of other investments,
investors should understand that certain other investment alternatives such as
certificates of deposit, U.S. government securities, money market instruments or
bank accounts may provide fixed yields and may be insured or guaranteed.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or the Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of investor/shareholder
services by third parties may compare the services of the Oppenheimer funds to
those of other mutual fund families selected by the rating or ranking services.
They may be based on the opinions of the rating or ranking service itself, based
on its research or judgment, or based on surveys of investors, brokers,
shareholders or others.
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ABOUT YOUR ACCOUNT
- ------------------------------------------------------------------------------
How to Buy Shares
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy shares. Dividends will begin to accrue on shares purchased by
the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in "How To Sell Shares" in the Prospectus. Asset Builder
Plans also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be automatically debited, normally four to five
business days prior to the investment dates selected in the Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds. Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
Application from the Distributor or your financial advisor. Complete the
Application and return it. The amount of the Asset Builder investment may be
changed or the automatic investments may be terminated at any time by writing to
the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 15 days) after receipt of such instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
O The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-Distributor and include
the following:
<PAGE>
Oppenheimer Bond Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Convertible Securities Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer MidCap Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Limited Term New York Municipal Fund
Rochester Fund Municipals
<PAGE>
and the following money market funds:
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
Determination of Net Asset Value Per Share. The net asset value per share of the
Fund is determined as of the close of business of The New York Stock Exchange
(the "Exchange") on each day that the Exchange is open, by dividing the value of
the Fund's net assets by the total number of shares outstanding. The Exchange
normally closes at 4:00 P.M., New York time, but may close earlier on some days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
The Fund's Board of Directors has established procedures for the valuation
of the Fund's securities, generally as follows:
|_| Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) Debt instruments having a maturity of more than 397 days when
issued, and (2) non-money market type instruments having a maturity
of 397 days or less when issued, and have a remaining maturity of 60
days or less;
|_| Debt instruments held by a money market fund that have a maturity of
397 days or less shall be valued at cost, adjusted for amortization of premiums
and accretion of discounts; and
|_| Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures.
If the Manager is unable to locate two market makers willing to give
quotes a security may be priced at the mean between the "bid" and "asked" prices
provided by a single active market maker (which in certain cases may be the
"bid" price if no "asked" price is available).
In the case of U.S. Government Securities and mortgage-backed securities,
where last sale information is not generally available, the Manager may use
pricing services approved by the Board of Directors. The pricing service may use
"matrix" comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity and other special factors involved. The Manager will
monitor the accuracy of the pricing services. That monitoring may include
comparing prices used for portfolio valuation to actual sales prices of selected
securities.
How to Sell Shares
The information below supplements the terms and conditions for redeeming shares
set forth in the Prospectus.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
In choosing to take advantage of the Checkwriting privilege, by signing
the Account Application or by completing a Checkwriting card, each individual
who signs: (1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or other
fiduciary or agent, as applicable, duly authorized to act on behalf of
the registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund=s drafts (checks) are payable to pay all checks drawn on the Fund
account of such person(s) and to redeem a sufficient amount of shares
from that account to cover payment of each check;
(4)specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or other
entities, the signature of any one signatory on a check will be
sufficient to authorize payment of that check and redemption from the
account, even if that account is registered in the names of more than
one person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably believed by
them to be genuine, or for returning or not paying checks that have not
been accepted for any reason.
Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemptions proceeds may be delayed if the Fund's custodian bank is not open for
business on a day when the Fund would normally authorize the wire to be made,
which is usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next bank
business day on which the Fund is open for business. No dividends will be paid
on the proceeds of redeemed shares awaiting transfer by Federal Funds wire.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Director,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must (1) state the reason for the
distribution; (2) state the owner's awareness of tax penalties if the
distribution is premature; and (3) conform to the requirements of the plan and
the Fund's other redemption requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign the
request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed and submitted to the Transfer Agent
before the distribution may be made. Distributions from retirement plans are
subject to withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be withheld
from any distribution even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the conditions of
applicable tax laws and will not be responsible for any tax penalties assessed
in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. Shareholders should contact their
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally the Exchange closes at 4:00 P.M.
Additionally, the order must have been transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form. The signature(s) of the registered owner(s) on the redemption
document must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the shareholder for
receipt of the payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable to all
shareholders of record. Payments must also be sent to the address of record for
the account and the address must not have been changed within the prior 30 days.
Required minimum distributions from OppenheimerFunds-sponsored retirement plans
may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges may arrange to have Automatic Withdrawal Plan payments transferred to
the bank account designated on the Account Application or signature-guaranteed
instructions sent to the Transfer Agent. Shares are normally redeemed pursuant
to an Automatic Withdrawal Plan three business days before the payment
transmittal date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
O Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Instructions should be
provided on the Account Application or signature-guaranteed instructions.
Exchanges made under these plans are subject to the restrictions that apply to
exchanges as set forth in "How to Exchange Shares" in the Prospectus and below
in this Statement of Additional Information.
O Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. Shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the
Transfer Agent nor the Fund shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Transfer Agent will credit all such shares to
the account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments of
the proceeds of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment according to the
choice specified in writing by the Planholder. Receipt of payment on the date
selected cannot be guaranteed.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed from the account will be held in uncertificated form in the
name of the Planholder. The account will continue as a dividend-reinvestment,
uncertificated account unless and until proper instructions are received from
the Planholder, his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for shares of the
same class of other Oppenheimer funds. Shares of this Fund are deemed to be
"Class A Shares" for this purpose. You can obtain a current list of funds
showing which funds offer which classes by calling the Distributor at
1-800-525-7048.
|_| All of the other Oppenheimer funds offer Class A, B and C shares
except Centennial Money Market Trust, Centennial Tax Exempt Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial America Fund,
L.P. and Centennial California Tax Exempt Trust, which only offer Class A
shares.
|_| Oppenheimer Main Street California Tax-Exempt Fund currently offers
only Class A and Class B shares.
|_| Class B and Class C shares of Oppenheimer Cash Reserves are
generally available only by exchange from the same class of shares of other
Oppenheimer funds or available through OppenheimerFunds-sponsored 401(k) plans.
|_| Class Y shares of Oppenheimer Real Asset Fund are not
exchangeable.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund. Shares of any money market fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge. They may also be used to
purchase shares of Oppenheimer funds subject to a contingent deferred sales
charge.
Shares of this Fund acquired by reinvestment of dividends or distributions
from the Fund or from any other of the Oppenheimer funds (other than Oppenheimer
Cash Reserves) or from any unit investment trust for which reinvestment
arrangements have been made with the Distributor may be exchanged at net asset
value for shares of any of the Oppenheimer funds. Shares of this Fund purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 30 days prior to
that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge.
To qualify for that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the shares of this
Fund are purchased in that way. If requested, they must supply proof of
entitlement to this privilege.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Convertible Securities Fund are permitted from shares of this Fund
or Class A shares of Oppenheimer Cash Reserves that were acquired by exchange of
Class M shares. No other exchanges may be made to Class M shares.
|_| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when shares of this Fund
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares.
|_| Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.
|_| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in, the fund to which the exchange is
to be made. Otherwise, the investor must obtain a prospectus of that fund before
the exchange request may be submitted. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans and retirement plan contributions will be
switched to the new account unless the Transfer Agent is instructed otherwise.
If all telephone lines are busy (which might occur, for example, during periods
of substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
|_| Processing Exchange Requests. Shares to be exchanged are redeemed on
the regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be acquired
are purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The Fund
reserves the right, in its discretion, to refuse any exchange request that may
disadvantage it (for example, if the receipt of multiple exchange requests from
a dealer might require the disposition of portfolio securities at a time or at a
price that might be disadvantageous to the Fund).
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that the
fund selected is appropriate for his or her investment and should be aware of
the tax consequences of an exchange. For Federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. The Fund, the Distributor, and the Transfer Agent
are unable to provide investment, tax or legal advice to a shareholder in
connection with an exchange request or any other investment transaction.
Dividends and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends and Taxes." Under the Internal Revenue
Code, by December 31 each year, the Fund must distribute 98% of its taxable
investment income earned from January 1 through December 31 of that year and 98%
of its capital gains realized in the period from November 1 of the prior year
through October 31 of the current year. It if does not, the Fund must pay an
excise tax on the amounts not distributed. It is presently anticipated that the
Fund will meet those requirements. However, the Fund's Board of Directors and
the Manager might determine in a particular year that it would be in the best
interest of shareholders for the Fund not to make distributions at the required
levels and to pay the excise tax on the undistributed amounts. That would reduce
the amount of income or capital gains available for distribution to
shareholders. The Fund's dividends will not be eligible for the
dividends-received deduction for corporations.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. That qualification enables the Fund
to "pass through" its income and realized capital gains to shareholders without
having to pay tax on them. The Fund qualified as a regulated investment company
in its last fiscal year and intends to qualify in future years, but reserves the
right not to qualify. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund qualifies. The Fund might not meet those
tests in a particular year. If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction for
payments of dividends and distributions made to shareholders.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of the Fund as promptly as possible
after the return of such checks to the Transfer Agent, in order to enable the
investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in Class A shares of
any of the other Oppenheimer funds listed above. Reinvestment will be made at
net asset value without sales charge. To elect this option, the shareholder must
notify the Transfer Agent in writing and must have an existing account in the
fund selected for reinvestment. Otherwise, the shareholder first must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of certain other Oppenheimer funds
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders of the Fund. It also handles
shareholder servicing and administrative functions. It is paid on a "at-cost"
basis.
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the Custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Auditors. KPMG Peat Marwick LLP are the independent auditors of the
Fund. They audit the Fund's financial statements and perform other related audit
services. They also act as auditors for certain other funds advised by the
Manager and its affiliates.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Cash Reserves:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Cash Reserves as of July 31, 1998,
the related statement of operations for the year then ended, the statements of
changes in net assets for the years ended July 31, 1998 and 1997, and the
financial highlights for the period January 1, 1993, to July 31, 1998. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at July 31, 1998, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the financial position of
Oppenheimer Cash Reserves at July 31, 1998, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Denver, Colorado
August 21, 1998
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
=============================================================================================
<S> <C> <C>
Certificates of Deposit--2.3%
- ---------------------------------------------------------------------------------------------
Deutsche Bank AG, 5.65%, 1/22/99 $ 3,000,000 $ 3,000,000
- ---------------------------------------------------------------------------------------------
Societe Generale, 5.87%, 9/30/98 4,000,000 4,000,121
-----------
Total Certificates of Deposit 7,000,121
=============================================================================================
Direct Bank Obligations--2.6%
- ---------------------------------------------------------------------------------------------
Abbey National North America Corp., 5.47%, 10/30/98 3,000,000 2,958,975
- ---------------------------------------------------------------------------------------------
National Westminster Bank of Canada, 5.523%, 11/2/98 5,000,000 4,928,661
-----------
Total Direct Bank Obligations 7,887,636
=============================================================================================
Letters of Credit--15.6%
- ---------------------------------------------------------------------------------------------
ABN Amro Bank PLC, guaranteeing commercial paper of Formosa
Plastics Corp., USA, Series A, 5.52%, 9/18/98 4,200,000 4,169,088
- ---------------------------------------------------------------------------------------------
Barclays Bank PLC, guaranteeing commercial paper of:
Banca Serfin SA, Institucion de Banca Multiple, Group Financiero
Serfin, 5.42%, 11/23/98 4,000,000 3,931,220
Banco de Credito Nacionale, SA, Series B, 5.42%, 8/11/98 8,000,000 7,987,956
Nacionale Financiera, SNC, 5.525%, 11/19/98 2,500,000 2,457,795
- ---------------------------------------------------------------------------------------------
Bayerische Vereinsbank AG, guaranteeing commercial paper of:
Banco de Galicia y Buenos Aires SA, 5.47%, 9/18/98 3,000,000 2,978,120
Unibanco-Unia de Bancos Brasilieros SA, Series C, 5.52%, 10/19/98 3,000,000 2,963,660
- ---------------------------------------------------------------------------------------------
Credit Suisse, guaranteeing commercial paper of:
Daewoo International (America) Corp., 5.52%, 12/2/98 3,000,000 2,943,420
Minmetals Capitals & Securities, Inc., 5.40%, 8/24/98 10,800,000 10,762,516
- ---------------------------------------------------------------------------------------------
Societe Generale, guaranteeing commercial paper of PEMEX
Capital, Inc., Series A, 5.52%, 10/2/98 5,000,000 4,952,467
- ---------------------------------------------------------------------------------------------
Swiss Bank Corp., guaranteeing commercial paper of PEMEX
Capital, Inc., 5.52%, 9/18/98 5,000,000 4,963,200
-----------
Total Letters of Credit 48,109,442
</TABLE>
8 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
=========================================================================================
<S> <C> <C>
Short-Term Notes--75.7%
- -----------------------------------------------------------------------------------------
Asset-Backed--14.1%
Asset Backed Capital Finance, Inc.:
5.68%, 9/23/98(1)(2) $ 2,500,000 $ 2,500,047
5.73%, 8/24/98(1)(2) 4,000,000 4,000,000
- -----------------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Series A, 5.47%, 9/1/98 3,500,000 3,483,514
- -----------------------------------------------------------------------------------------
CXC, Inc.:
5.50%, 12/16/98(3) 5,000,000 4,895,347
5.515%, 12/7/98(3) 5,000,000 4,901,956
5.523%, 11/16/98(3) 3,000,000 2,950,753
- -----------------------------------------------------------------------------------------
Falcon Asset Securitization Corp., 5.70%, 8/4/98(3) 5,000,000 4,997,625
- -----------------------------------------------------------------------------------------
Preferred Receivables Funding Corp., 5.49%, 11/23/98(3) 3,000,000 2,947,845
- -----------------------------------------------------------------------------------------
RACERS, Series 1998-MM-3-5, 5.563%, 8/31/98(1)(2) 5,000,000 5,000,000
- -----------------------------------------------------------------------------------------
Sigma Finance, Inc.:
5.44%, 10/15/98(3) 3,000,000 2,966,000
5.44%, 9/10/98(3) 5,000,000 4,969,778
-----------
43,612,865
- -----------------------------------------------------------------------------------------
Beverages--3.5%
Coca-Cola Enterprises, Inc.:
5.48%, 10/23/98(3) 5,000,000 4,936,828
5.48%, 10/28/98(3) 2,000,000 1,973,209
5.50%, 12/21/98(3) 4,000,000 3,913,222
-----------
10,823,259
- -----------------------------------------------------------------------------------------
Broker/Dealers--21.2%
Bear Stearns Cos., Inc.:
5.45%, 10/22/98 4,000,000 3,950,344
5.47%, 10/28/98 5,000,000 4,933,144
5.505%, 12/17/98 5,000,000 4,894,487
- -----------------------------------------------------------------------------------------
Goldman Sachs Group, LP, 5.51%, 9/24/98 5,000,000 4,958,675
- -----------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 5.52%, 12/8/98 5,000,000 4,901,100
- -----------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
5.43%, 10/14/98 4,000,000 3,955,353
5.49%, 11/6/98 5,000,000 4,926,038
5.607%, 10/8/98(1) 3,000,000 3,000,000
- -----------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 5.69%, 8/3/98(1) 10,000,000 10,000,000
- -----------------------------------------------------------------------------------------
Republic New York Securities Corp., 5.94%, 8/3/98(1) 8,000,000 8,000,000
- -----------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.:
5.50%, 11/16/98 7,000,000 6,885,569
5.717%, 10/20/98(1) 5,000,000 5,000,000
-----------
65,404,710
</TABLE>
9 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Finance--9.2%
CIT Group Holdings, Inc., 5.50%, 9/14/98 $ 5,000,000 $ 4,966,389
- ----------------------------------------------------------------------------------------
Countrywide Home Loans:
5.54%, 8/25/98 4,700,000 4,682,641
5.60%, 8/21/98 3,500,000 3,489,111
- ----------------------------------------------------------------------------------------
FINOVA Capital Corp.:
5.67%, 9/11/98 4,000,000 3,974,808
5.55%, 11/13/98 4,000,000 3,935,867
- ----------------------------------------------------------------------------------------
Heller Financial, Inc., 5.58%, 11/30/98 7,500,000 7,359,338
-----------
28,408,154
- ----------------------------------------------------------------------------------------
Consumer Finance--6.5%
Beneficial Corp.:
5.505%, 9/23/98 5,000,000 4,959,477
5.55%, 8/6/98 5,000,000 4,996,146
- ----------------------------------------------------------------------------------------
Island Finance Puerto Rico, Inc.:
5.51%, 9/24/98 5,000,000 4,958,675
5.57%, 8/4/98 5,000,000 4,997,679
-----------
19,911,977
- ----------------------------------------------------------------------------------------
Diversified Financial--3.2%
General Motors Acceptance Corp., 5.50%, 2/19/99 5,000,000 4,845,694
- ----------------------------------------------------------------------------------------
Household Finance Corp., 5.637%, 9/9/98(1) 5,000,000 5,000,000
-----------
9,845,694
- ----------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.6%
Baxter International, Inc., 5.56%, 8/5/98(3) 5,000,000 4,996,911
- ----------------------------------------------------------------------------------------
Insurance--10.4%
AIG Life Insurance Co., 5.668%, 8/3/98(1)(2) 7,000,000 7,000,000
- ----------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Co., 5.667%, 8/3/98(1)(2) 5,000,000 5,000,000
- ----------------------------------------------------------------------------------------
Protective Life Insurance Co., 5.698%, 8/3/98(1) 5,000,000 5,000,000
- ----------------------------------------------------------------------------------------
Security Benefit Life Insurance Co., 5.686%, 8/15/98(1) 10,000,000 10,000,000
- ----------------------------------------------------------------------------------------
TransAmerica Life Insurance & Annuity Co., 5.668%, 8/3/98(1) 5,000,000 5,000,000
-----------
32,000,000
- ----------------------------------------------------------------------------------------
Leasing & Factoring--2.4%
American Honda Finance Corp.:
5.51%, 12/4/98 2,550,000 2,501,214
5.687%, 10/20/98(1)(3) 5,000,000 5,000,000
-----------
7,501,214
</TABLE>
10 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Nondurable Household Goods--2.0%
Newell Co., 5.70%, 8/3/98(3) $ 6,200,000 $ 6,198,037
- ----------------------------------------------------------------------------------------
Oil-Integrated--1.6%
Fina Oil & Chemical Co., 5.52%, 8/14/98(3) 5,000,000 4,990,033
------------
Total Short-Term Notes 233,692,854
========================================================================================
Foreign Government Obligations--1.6%
- ----------------------------------------------------------------------------------------
Comision Federal de Electricidad, Series A, 5.56%, 8/25/98 5,000,000 4,981,467
- ----------------------------------------------------------------------------------------
Total Investments, at Value 97.8% 301,671,520
- ----------------------------------------------------------------------------------------
Other Assets Net of Liabilities 2.2 6,911,136
----------- ------------
Net Assets 100.0% $308,582,656
=========== ============
</TABLE>
Short-term notes, direct bank obligations and letters of credit are generally
traded on a discount basis; the interest rate is the discount rate received by
the Fund at the time of purchase. Other securities normally bear interest at the
rates shown.
(1) Floating or variable rate obligation. The interest rate, which is based on
specific, or an index of, market interest rates, is subject to change
periodically and is the effective rate on July 31, 1998. This instrument may
also have a demand feature which allows, on up to 30 days' notice, the recovery
of principal at any time, or at specified intervals not exceeding one year.
Maturity date shown represents effective maturity based on variable rate and, if
applicable, demand feature.
(2) Represents a restricted security which is considered illiquid, by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale. Such securities amount to $23,500,047, or 7.62% of the
Fund's net assets. The Fund may not invest more than 10% of its net assets
(determined at the time of purchase) in illiquid securities.
(3) Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $60,637,544, or 19.65% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
See accompanying Notes to Financial Statements.
11 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities July 31, 1998
- --------------------------------------------------------------------------------
===============================================================================
Assets
Investments, at value $ 301,671,520
- -------------------------------------------------------------------------------
Cash 621,237
- --------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 8,158,051
Interest 642,966
- -------------------------------------------------------------------------------
Other 32,246
-------------
Total assets 311,126,020
===============================================================================
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 1,860,246
Dividends 417,265
Transfer and shareholder servicing agent fees 170,955
Distribution and service plan fees 31,002
Other 63,896
-------------
Total liabilities 2,543,364
===============================================================================
Net Assets $ 308,582,656
=============
===============================================================================
Composition of Net Assets
Paid-in capital $ 308,587,651
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (4,995)
-------------
Net assets $ 308,582,656
=============
12 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $210,476,996 and 210,538,153 shares of
beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $80,004,517 and 80,003,530 shares of beneficial interest
outstanding) $1.00
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $18,101,143 and 18,100,638 shares of beneficial interest
outstanding) $1.00
See accompanying Notes to Financial Statements.
13 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended July 31, 1998
- --------------------------------------------------------------------------------
================================================================================
Investment Income
Interest $15,850,050
================================================================================
Expenses
Management fees--Note 3 1,368,194
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 3 1,186,442
- --------------------------------------------------------------------------------
Distribution and service plan fees--Note 3:
Class A 367,827
Class B 547,120
Class C 114,479
- --------------------------------------------------------------------------------
Shareholder reports 214,706
- --------------------------------------------------------------------------------
Registration and filing fees 142,371
- --------------------------------------------------------------------------------
Custodian fees and expenses 28,567
- --------------------------------------------------------------------------------
Legal, auditing and other professional fees 15,602
- --------------------------------------------------------------------------------
Insurance expenses 4,845
- --------------------------------------------------------------------------------
Trustees' fees and expenses 2,527
- --------------------------------------------------------------------------------
Other 8,659
-----------
Total expenses 4,001,339
================================================================================
Net Investment Income 11,848,711
================================================================================
Net Realized Gain on Investments 522
================================================================================
Net Increase in Net Assets Resulting from Operations $11,849,233
===========
See accompanying Notes to Financial Statements.
14 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended July 31,
1998 1997
=====================================================================================
<S> <C> <C>
Operations
Net investment income $ 11,848,711 $ 10,745,370
- -------------------------------------------------------------------------------------
Net realized gain 522 2,265
- -------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 11,849,233 10,747,635
=====================================================================================
Dividends and Distributions to Shareholders
Class A (8,374,810) (7,785,359)
Class B (2,871,927) (2,546,870)
Class C (601,974) (413,141)
=====================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting
from beneficial interest transactions--Note 2:
Class A 37,506,804 2,937,563
Class B 25,995,434 (31,565,083)
Class C 8,976,542 (2,592,039)
=====================================================================================
Net Assets
Total increase (decrease) 72,479,302 (31,217,294)
- -------------------------------------------------------------------------------------
Beginning of period 236,103,354 267,320,648
------------- -------------
End of period $ 308,582,656 $ 236,103,354
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------
Year Ended July 31,
1998 1997 1996(2)
=============================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .04 .04 .03
Dividends and distributions to shareholders (.04) (.04) (.03)
- -----------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
===== ===== =====
=============================================================================
Total Return(5) 4.61% 4.41% 2.68%
=============================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $210,477 $172,970 $170,031
- -----------------------------------------------------------------------------
Average net assets (in thousands) $186,795 $179,948 $149,889
- -----------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.48% 4.33% 4.47%(6)
Expenses 1.28% 1.29% 1.06%(6)
</TABLE>
(1) For the period from December 1, 1993 (inception of offering) to December 31,
1993.
(2) For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
(3) For the period from August 17, 1993 (inception of offering) to December 31,
1993. Oppenheimer Cash Reserves
(4) Less than $.005 per share.
16 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B
------------------------------ -----------------------------
Year Ended December 31, Year Ended July 31,
1995 1994 1993 1998 1997 1996(2)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .05 .03 .02 .04 .04 .02
Dividends and distributions to shareholders (.05) (.03) (.02) (.04) (.04) (.02)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
==============================================================================================================
Total Return(5) 4.84% 3.22% 2.05% 3.98% 3.82% 2.35%
==============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $148,529 $99,361 $70,924 $80,005 $54,009 $85,573
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $105,349 $87,908 $76,910 $73,003 $67,333 $49,226
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.71% 3.25% 1.99% 3.93% 3.78% 3.91%(6)
Expenses 1.36% 1.32% 1.55% 1.83% 1.84% 1.61%(6)
</TABLE>
(5) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
(6) Annualized.
17 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Class B (continued)
-----------------------------
Year Ended December 31,
1995 1994 1993(3)
==========================================================================
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00
- --------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .04 .03 --(4)
Dividends and distributions to shareholders (.04) (.03) --(4)
- --------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00
===== ===== =====
==========================================================================
Total Return(5) 4.26% 2.54% 0.56%
==========================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $37,378 $46,803 $628
- --------------------------------------------------------------------------
Average net assets (in thousands) $35,360 $21,262 $454
- --------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.15% 3.05% 1.49%(6)
Expenses 1.92% 1.89% 2.12%(6)
(1) For the period from December 1, 1993 (inception of offering) to December 31,
1993.
(2) For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
(3) For the period from August 17, 1993 (inception of offering) to December 31,
1993.
(4) Less than $.005 per share.
18 Oppenheimer Cash Reserves
<PAGE>
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------
Year Ended July 31, Year Ended December 31,
1998 1997 1996(2) 1995 1994 1993(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .04 .04 .02 .04 .02 --(4)
Dividends and distributions to shareholders (.04) (.04) (.02) (.04) (.02) --(4)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
==============================================================================================================
Total Return(5) 3.99% 3.84% 2.35% 4.21% 2.51% 0.14%
==============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $18,101 $9,125 $11,717 $5,024 $5,604 $1
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $15,297 $10,930 $6,333 $6,040 $2,107 $1
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.94% 3.78% 3.91%(6) 4.12% 3.19% 1.18%(6)
Expenses 1.83% 1.85% 1.61%(6) 1.97% 1.90% 2.35%(6)
</TABLE>
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total returns
reflect changes in net investment income only.
6. Annualized.
See accompanying Notes to Financial Statements.
19 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Cash Reserves (the Fund) is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The Fund's investment objective is to seek the maximum current income
that is consistent with stability of principal by investing in "money market"
securities meeting specified quality standards. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class
C shares. Class B and Class C shares may be subject to a contingent deferred
sales charge. All classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to that class and exclusive voting
rights with respect to matters affecting that class. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly. To
effect its policy of maintaining a net asset value of $1.00 per share, the Fund
may withhold dividends or make distributions of net realized gains.
20 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Realized gains and losses on investments are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended July 31, 1998 Year Ended July 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 724,810,258 $ 724,810,258 539,202,800 $ 539,202,800
Dividends and distributions
reinvested 7,669,695 7,669,695 7,258,877 7,258,877
Redeemed (694,973,149) (694,973,149) (543,524,114) (543,524,114)
------------ ------------- ------------ -------------
Net increase 37,506,804 $ 37,506,804 2,937,563 $ 2,937,563
============ ============= ============ =============
- ------------------------------------------------------------------------------------------
Class B:
Sold 298,115,568 $ 298,115,568 228,968,814 $ 228,968,814
Dividends and distributions
reinvested 2,362,655 2,362,655 2,072,482 2,072,482
Redeemed (274,482,789) (274,482,789) (262,606,379) (262,606,379)
------------ ------------- ------------ -------------
Net increase (decrease) 25,995,434 $ 25,995,434 (31,565,083) $ (31,565,083)
============ ============= ============ =============
- ------------------------------------------------------------------------------------------
Class C:
Sold 166,744,272 $ 166,744,272 72,171,736 $ 72,171,736
Dividends and distributions
reinvested 490,146 490,146 343,761 343,761
Redeemed (158,257,876) (158,257,876) (75,107,536) (75,107,536)
------------ ------------- ------------ -------------
Net increase (decrease) 8,976,542 $ 8,976,542 (2,592,039) $ (2,592,039)
============ ============= ============ =============
</TABLE>
21 Oppenheimer Cash Reserves
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
3. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.50% on the first
$250 million of average annual net assets, 0.475% of the next $250 million,
0.45% of the next $250 million, 0.425% of the next $250 million and 0.40% of
average annual net assets in excess of $1 billion.
Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class B and Class C shares totaled $457,869 and $9,700, respectively, of
which $32,713 was paid to an affiliated broker/dealer for Class B shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund and for other
registered investment companies. OFS's total costs of providing such services
are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.20% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. During the year ended July
31, 1998, OFDI paid $92,868 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B
and Class C shares to compensate OFDI for its costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B and Class C shares,
for its services rendered in distributing Class B and Class C shares. OFDI is
also authorized to receive a service fee of 0.25% per year to compensate dealers
providing personal services for accounts that hold Class B and Class C shares.
At present, these service fees are set at zero for Class B and Class C shares.
Each fee is computed on the average annual net assets of Class B and Class C
shares, determined as of the close of each regular business day. During the year
ended July 31, 1998, OFDI retained $547,120 and $114,479, respectively, as
compensation for Class B and Class C sales commissions and service fee advances,
as well as financing costs. If either Plan is terminated by the Fund, the Board
of Trustees may allow the Fund to continue payments of the asset-based sales
charge to OFDI for distributing shares before the Plan was terminated.
22 Oppenheimer Cash Reserves
<PAGE>
Appendix A
Description of Securities Ratings
Below is a description of the two highest rating categories for Short Term Debt
and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on behalf of
the Fund. The ratings descriptions are based on information supplied by
the ratings organizations to subscribers.
Short Term Debt Ratings.
Moody's Investor Services, Inc. ("Moody's"): The following rating designations
for commercial paper (defined by Moody's as promissory obligations not having
original maturity in excess of nine months), are judged by Moody's to be
investment grade, and indicate the relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling
market positions in well-established industries; (b) high
rates of return on funds employed; (c) conservative
capitalization structures with moderate reliance on debt
and ample asset protection; (d) broad margins in earning
coverage of fixed financial charges and high internal cash
generation; and (e) well established access to a range of
financial markets and assured sources of alternate
liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced
by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are designated
"Moody's Investment Grade" ("MIG"). Short-term notes which have demand features
may also be designated as "VMIG". These rating categories are as follows:
MIG1/VMIG1: Best quality. There is present strong protection by
established cash flows, superior liquidity support or
demonstrated broadbased access to the market for
refinancing.
MIG2/VMIG2: High quality. Margins of protection are ample although not
so large as in the preceding group.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no more
than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted
with a plus sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the
relative degree of safety is not as high as for issues
designated "A-1".
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
S&P assigns "dual ratings" to all municipal debt issues that have a demand or
double feature as part of their provisions. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second rating
addresses only the demand feature. With short-term demand debt, S&P's note
rating symbols are used with the commercial paper symbols (for example,
"SP-1+/A-1+").
Fitch IBCA, Inc. ("Fitch"): Fitch assigns the following short-term ratings to
debt obligations that are payable on demand or have original maturities of
generally up to three years, including commercial paper, certificates of
deposit, medium-term notes, and municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree
of assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is
only slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as
for issues assigned "F-1+" or "F-1" ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities, when issued, of
under one year), asset-backed commercial paper, and certificates of deposit (the
ratings cover all obligations of the institution with maturities, when issued,
of under one year, including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated "TBW-1".
Long Term Debt Ratings.
These ratings are relevant for securities purchased by the Fund with a remaining
maturity of 397 days or less, or for rating issuers of short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely
to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong positions of
such issues.
Aa: Judged to be of high quality by all standards. Together
with the "Aaa" group they comprise what are generally known
as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as
in "Aaa" securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower end of
its generic rating category.
Standard & Poor's: Bonds (including municipal bonds) are rated as follows:
AAA: The highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and
differ from "AAA" rated issues only in small degree.
Fitch IBCA, Inc.:
AAA: Considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to
be affected by reasonably foreseeable events.
AA: Considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as
bonds rated "AAA". Plus (+) and minus (-) signs are used in
the "AA" category to indicate the relative position of a
credit within that category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are
negligible, being only slightly more than for risk-free
U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because
of economic conditions. Plus (+) and minus (-) signs are
used in the "AA" category to indicate the relative position
of a credit within that category.
TBW: TBW issues the following ratings for companies. These ratings assess the
likelihood of receiving payment of principal and interest on a timely basis and
incorporate TBW's opinion as to the vulnerability of the company to adverse
developments, which may impact the market's perception of the company, thereby
affecting the marketability of its securities.
A: Possesses an exceptionally strong balance sheet and earnings
record, translating into an excellent reputation and
unquestioned access to its natural money markets. If weakness
or vulnerability exists in any aspect of the company's
business, it is entirely mitigated by the strengths of the
organization.
A/B: The company is financially very solid with a favorable track
record and no readily apparent weakness. Its overall risk
profile, while low, is not quite as favorable as for companies
in the highest rating category.
<PAGE>
B-1
Appendix B
- ------------------------------------------------------------------------------
Industry Classifications
- ------------------------------------------------------------------------------
Aerospace/Defense Food
Air Transportation Gas Utilities
Asset-Backed Gold
Auto Parts Distribution Health Care/Drugs
Automotive Health Care/Supplies & Services
Bank Holding Companies Homebuilders/Real Estate
Banks Hotel/Gaming
Beverages Industrial Services
Broadcasting Information Technology
Broker-Dealers Insurance
Building Materials Leasing & Factoring
Cable Television Leisure
Chemicals Limited Purpose Finance
Commercial Finance Manufacturing
Computer Hardware Metals/Mining
Computer Software Nondurable Municipality Household Goods
Conglomerates Oil - Integrated
Consumer Finance Paper
Containers Publishing/Printing
Convenience Stores Railroads
Cosmetics Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Stores Specialty Retailing
Drug Wholesalers Steel
Durable Household Goods Supermarkets
Education Telecommunications - Technology
Electric Utilities Telephone - Utility
Electrical Equipment Textile/Apparel
Electronics Tobacco
Energy Services & Producers Toys
Entertainment/Film Trucking
Environmental Wireless Services
Foreign Government
<PAGE>
- ------------------------------------------------------------------------------
Oppenheimer Money Market Fund, Inc.
- ------------------------------------------------------------------------------
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Web Site: http://www.oppenheimerfunds.com
Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
67890
PX0200.001.1198
